S1 Ep21 | Michael Katchen

What is Wealthsimple?

Michael Katchen is the founder and CEO of Wealthsimple, one of Canada’s new crop of online investment managers, and is on a mission to make smart investing cheaper, simpler, and easier for everyone.

Wealthsimple “manages your investments so you don’t have to”.

A dedicated Wealth Concierge will guide you through the entire process: from assessing risk tolerance and determining investment goals, to setting up regular monthly contributions. Wealthsimple will then build you a customized portfolio and start investing for you, they will take care of the ongoing management of your accounts by optimizing and rebalancing regularly through technology instead of manpower making their service extremely affordable.

Check out what Wealthsimple is doing, and have a listen to what Michael has to say about it:

We had a lot of fun recording this episode of the because money podcast. Michael Katchen from Wealthsimple shares his vision of where the financial services industry in Canada will be going. The video pretty much speaks for itself, however if you are more of a reader, the transcript has been provided below! Enjoy!

Transcript

Sandi: Oh well, good evening. Welcome to Because Money. I was just about to say “Welcome to Wealthsimple,” but that’s because we were just talking with Michael Katchen, who is the founder of Wealthsimple, and we have some very interesting news in that they have approval from all the different things that they need to have approval for.

So Wealthsimple is Jackson: Sandi, we’re on, go for it.
launched, and we’re talking today about not robo‑advisors. We’re actually going to spend some time talking about what we should call these online investment advisors, investment managers, wealth managers. We have so many things we could call them. And really, it’s not a regulated term, so we can just make up our own anyway.

I think we’re going to talk a little bit about what makes for healthy investing and why we think may the asset management or the investment industry in Canada—and possibly the world—is kind of broken, and what we’d like to see in its place, and what we think Wealthsimple might be doing, and some of the other companies, to make that a better world.

So I think maybe if nobody minds, maybe we can just have Michael introduce himself and just tell us what Wealthsimple is and what you want to say today…or not. [laughs]. Or we scared him away. Maybe there he is.

Michael: Am I back now?

Sandi: You’re back. Welcome back.

Jackson: We did throw it over to you, and we’ve got a perfect little image of you just sitting there like this. [laughs] So now that you’re back, we’ll just throw that over to you. We’re looking for an introduction of who you are, what you do, and how long you’ve been doing all that kind of stuff.

Michael: Well great, I’m sorry that I popped off there for a second. So I’m the founder of Wealthsimple, which is a new investment management company here in Canada. Our mission is to make smart investing really simple and available to everyone, regardless of their account size or financial knowledge. It’s something that we’re really excited and passionate about.

My background is both in financial services, where I worked as a consultant for a few years here in Canada, and then technology. So I used to be part of a wonderful startup down in Silicon Valley called 1000memories, which we sold a few years ago to Ancestry.com. And I did the whole startup gambit with building tech products, and managed to recruit a wonderful technology team from that company—so engineers, product designers. I brought them back to Canada and we’ve been working on Wealthsimple for about six months.

Sandi: So I’m going to start with a very big question. What is Wealthsimple trying to do? What is it that’s broken or that’s not fill right now, that is going to get fixed or filled by what you’re doing?

Michael: Yeah, I think that’s a really good question. So I think the easiest way to think about it is we are trying to make really high-quality wealth management available to everyone.

So when you think about financial services and financial advice in general, you think typically great advice has only been available to folks that have a lot of money. When you think about account sizes at most financial advisors, you’re looking at $250K or $500K as the minimum to really get in the door,. and that is out of reach for a lot of Canadians. And even if you have that kind of dough, it’s really tough to figure out who the right advisors are and guarantee the consistency or quality of service that you can expect.

So we’re trying to do a few things. One is building really sophisticated, smart strategy that brings together the best minds in Canadian investment management and builds that solution and strategy out for people. And two is make accessible to everyone. So rather than having a $250K or $500K account minimum, have just a $5K account minimum, that really opens up the market and lets anybody who can afford to invest really get started with smart investment strategies.

That’s really what we’re focussed on doing, is making this wonderful solution available to everybody.

Robb: Michael, where does the “simple” come into the equation as far as model portfolio, or something like that, that people can understand and that can be easily rebalanced, or however that works. Tell us a little bit about that.

Michael: Yeah, I love it. I mean, obviously simple is so core to what we do that we decided to put it in the name of the business. We talked about access is one of the issues with financial services. I think the second is—and you guys are very familiar with this. It think you talk about it on the show a lot—that the financial services and investing in general have become so complex and so overwhelming for people, that they shut down and they find it really hard to do the right thing with their money. And a lot of that is due to the noise that’s generated by the industry today.

When you think about what it takes to be a successful investor, it really is about the simple, core principles, and sticking to them, of keep your costs low, get diversified, stay disciplined, stick to a plan once you have it and don’t freak out when the markets start moving up and down. And four, contribute to it regularly. And if you can stick to those four super-simple principles, you’re going to be set up for really successful long-term investing.

So that’s a really big part of what we’re trying to do is focus on the simple core pieces of investing, and then strip out the noise from the service and make it real easy for people to set up an account, so you don’t have to go out and print off 40 pages of paperwork when you open an account, and fax it in or mail it in with a photocopy of a cheque and a passport. It can all be done online now. There’s no jargon. We’re trying to rip out all the jargon from the site and make it really easy for people to understand the types of portfolios that we’re setting them up with.

Sandi: Sorry, I had to laugh for a second. I obviously want to say two things at once, which is pretty typical for me. And my first is really only anecdotal. I used to open online investor accounts for people all the time—all the time. And I have multiple accounts. I tried to open one not too long ago and they sent it back with errors. And it just made me think if I am getting errors—and it’s not like because I’m a genius or anything. Come on, we all know that that’s not true—but if I’m getting errors, and I’ve done this multiple, multiple times, then surely to goodness there’s something wrong with the process. So I really like that that’s one of your missions is not just to use the word and sort of pay homage to the concept of simple, but to actually make an effort to make that happen.

I don’t know if we lost him. Oh, we didn’t. Good. [laughs] Sorry. The second thing I was going to say was what you’re doing is right, I think—making it simple for people. Do you think that—this maybe we’re going to do some navel-gazing. Do you maybe that might be a stumbling block? Do you think that sometimes we think we’re smarter than we really are, or we think things need to be more complicated? Do you find that your work is going to now be to convince people that really, no, simple is better. Or is it going to be once they’re convinced that simple is better, you’re the person that they need to talk to.

Michael: It’s an interesting question. I think both are really important. So if we tick back to what we’re trying to do, if we’re successful in this business, we’re going to move the industry in a wonderful direction. A direction that is in favour of investors, that is in favour of transparency, and in favour of simplicity—all those wonderful things.

And I think a big part of what it’ll take to get there is investor education. So helping people understand that it’s not about the noise that they hear on television all day and the charts that get up on BNN, in terms of that that is what it takes to be a successful investor. That it really is about sticking to the simple core principles. So I think investor education is a huge piece of that.

But of course, a lot of people know that already. And if they do know that, a solution like Wealthsimple simply doesn’t exist in the market today, where they can go and get a really wonderful portfolio that’s built for them, managed for them, has automated rebalancing, automated tax laws harvesting, and wonderful reporting that it kind of takes care of itself.

So I’m hoping that both of those things play a major role, if that answers your question.

Sandi: Yeah, it does.

Jackson: I’m going to jump in and ask, now you just received permission to do this from the government, or whatever that would be called.

Michael: I think that’s the accurate term. [laughs]

Jackson: So you’ve just rolled out the website. Now what does that look like? Is this “Hey everybody, come sign up” or are you doing it in waves? If somebody wants to actually go to your website, wealthsimple.com, and click INVEST NOW, what does that look like right now.

Michael: This might be a leading question if you’ve tried it already.

Jackson: I haven’t actually. I’m going to hit it just now. And I’m just signing up on the list—there we go.

Michael: So, a really important part of what we’re trying to do is we want to build a product people love to use. So the only way to do that is to test it as much as we can in terms of are we getting the experience right for people as we bring them onboard. So we’re doing that in a very measured way. We’re not opening the floodgates. We’re doing a three waves of beta tests that we’ve already launched, so we have 100 beta clients that are committed to our business and put in capital. And we’re in that beta program now. And as soon as we’re through, assuming we’re able to deliver that A+ experience that we’re promising, then we’ll open the floodgates and let anybody onboard.

Jackson: Cool.

Robb: You know, Sandi talked about how difficult or complicated this process can be, even just to go into a branch and open up an account. You’ve got to sign so much paperwork. What type of regulatory hurdles did you have to jump through in order to get this off the ground so that someone can just do this online, and do it in an easy way that won’t leave them scratching their heads?

Michael: Yeah, it wasn’t easy, I’ll tell you that. [laughs] You know, the regulators are in this really interesting spot right now, where there’s so much change happening in investment management and the industry, that they’re just trying to wrap their heads around what should the future look like. Because you know, these things have major implications for investors, and they want to make sure that they get them right. So they’re being very thoughtful and very methodical about how they go through this approval process for any new applicant.

The cool part for us is because we’re so early in the game here, my hope is we’ll be able to help shape what the future of the industry looks like, through example and through showing how these things are better for investors and able to help investors understand their finances, bring greater transparency in their performance, and all that sort of stuff. And I think the regulators are excited about that.

You know, it’s a very intensive process. You apply in each province, which is regulated separately. And it took about four months for us to get through this process, but the regulators are excited about what we’re building and what we can bring to investors in Canada.

Robb: And how is it different from the client’s perspective? Do you have to fill out the “Know your Client” risk analysis forms and all those types of things?

Michael: Yeah, so I should make this clear. There are no exceptions to the way that we’ve been approved. We don’t have any particular exemptions from the regulatory framework that exists. So the same very strict, “Know Your Client”, and money laundering regulations apply to our business as they would to any investment manager in Canada.

The real difference that we’ve been able to do is simply around the technology and the ease-of-use of shelling out some of these forms. So for instance, with most—I can’t say everybody, but it’s almost every other investment manager in the country—to open an account, you would have to type in 30 pages worth of account documents. Quite an extensive account application that prints in 30 pages. You sign it in 10 spots, and then you have to mail it in with a void cheque and a copy of a driver’s licence.

A big part of what we’ve done is we’ve made it all online. So at least there’s this lower hurdle that you don’t have to go to the post office, you don’t have to print all these documents. You can do it from the comfort of your home or your mobile phone. It’s like a really small thing, but actually I think delivers a huge amount of convenience to people as they go through this process.

The other is around the context that we’re able to add as people go through the account application. So rather than simply putting a pdf form online and having you fill it out, we can try to help you understand what it is that you’re doing and why. So why is it that we’re asking you about your employment information? Why is it that we’re asking you about your financial circumstance and your risk assessment? We can start to paint the context of it, so it makes it more intuitive, rather than this super-jarring, “Why are you asking me everything and anything about my life, and anything I’ve ever done in the past” kind of thing. Does that make sense?

Robb: Yep.

Michael: Cool.

Sandi: So my question is, and you mentioned it briefly, you said the regulators are having a hard time kind of figuring out what investment management should look like in the future. And I’m wondering what you think investment management should look like in the future. I think you would answer this way anyway, but not necessarily kind of what Wealthsimple is doing, but what the whole landscape should look like. I don’t know—it’s a big question. Go nuts—blue sky.

Michael: Yeah, wow. That’s a really interesting one. I think two things, more than anything stand out in my mind. One is transparency. So it is just so glaringly obvious that people have no idea what investment plan they’re in, how much they’re paying in fees, what their performance is like. And if there is anywhere in particular where regulation can help move the industry in a really positive way, quickly, it’s around creating greater transparency. And there is actually, in fact, some wonderful new legislation coming out over the next 18 months, called CRM2, which is forcing investment managers for the first time to disclose things like, “How much are you paying in fees?” Which seems like don’t they have to disclose that today? But no, they don’t.

It’s actually like a monumentous thing in Canadian history, where for the first time Canadians will actually get to see on their statements how much they’re paying in fees. And that’s a wonderful first step. So I just see around fees, around performance, around suitability, and why this plan is what it is and why it’s right for you. So transparency is a huge piece of what the future should look like. And complete transparency, about everything. No hidden fees, no nothing—total transparency.

And secondly, simplicity. It’s this weird tension, where we have these huge account applications that are required by the regulators to protect investors. But sometimes they actually do the opposite, which is they scare people away from starting. You know, you get too detailed, it’s overwhelming, and people freak out. Anything we can do to reduce the barriers to getting people started, I think is hugely helpful to moving the industry in a positive way.

Robb: So the investment industry kind of lobbyists have been going around saying that as all this comes through, and maybe even we start talking about banning embedded commissions, or trailing commissions. That’s going to leave this mass gap in terms of advice for the average Canadian, as these advisors will no longer have a profitable way to make a living. That’s how they make their living now.

So I guess my question to you is why do you want to put so many financial advisors out of work?

Michael: Yeah, no we don’t. [laughs] Loaded question. The simple answer is we don’t. I actually think there are many wonderful financial advisors out there. What I’d love to see them do though is really focus on advice and not what most or many of them are doing today, which is focusing on sales. And I think there’s a huge difference between sales and advice, and creating some separation between those two things, I think is a wonderful thing.

So I actually don’t see advisors going away. I don’t see any of these new businesses that are trying to drive down the costs of investments for the average person, to destroy the financial advisory business. What I hope it does, is it refocuses people on the advice and the value-add that comes with financial planning and insurance and all those other wonderful things that are auxiliary to simple investment management and sales.

Sandi: Are you the Napster—and I guess other people, other companies that coming online, sort of in a similar trajectory. Are you guys the Napster of financial advice and investment planning?

Michael: I don’t…[mumbles and grumbles]

Robb: Would it pay?

Michael: Yeah, exactly. [laughs]

Sandi: Not the illegal part of Napster. Obviously, any new company in any kind of space has an advantage over an old one in one sense, that you don’t have to incorporate your legacy stuff. You don’t have to incorporate the old way of doing things, like change course halfway and do something different, right. So you have that advantage.

But you also have the advantage that you’re not the one sitting back on your heels and saying, “This is the way we’ve always done things.” I don’t know how to react. You’re doing something different. I don’t want to do what you’re doing, but I don’t want you doing what you’re doing to change how I’m doing what I’m doing.

So in a way, it feels as though the investment advice industry in Canada is—even with CRM2, with the talk of banning embedded commissions—is really facing a huge change in their very most basic assumptions about the way they do business. And it’s not necessarily because of you, or other companies like Wealthsimple, it’s because it’s almost the tide of change, it feels like. Are they fighting a losing battle? Do they have to change? Do they have to roll with the times somehow, and acknowledge that it’s never going to be the same?

Michael: Yes, I mean, the world is changing and it’s changing at an ever more rapid pace. You see that across every industry. And financial services is one of the oldest industries in the world, if not the oldest—well, one of them. It’s for sure, feeling the effects of that. You see that in the States. You certainly feel the feelings of it here in Canada, where people see the writing on the wall. Where there is a greater demand for transparency from investors. There’s a greater demand for fees that make sense, from investors.

And especially when you see the cycles that we’ve gone through over the last 15 years of two major market corrections, people really asking the question, “What value am getting from my advisor? What am I paying for?” And asking in a really meaningful way. I think it’s forced this type of conversation that will move the industry in the right direction. Does that answer your question?

Sandi: That does. Again, it was another one of those sort of Sandi weird questions anyway. So I apologize for that.

Michael: I hate to do this. Give me half a second. My phone’s about to die.

Sandi: Go.

Jackson: We need some background music or something.

Sandi: How about technical difficulties, like “Beep, boop, do-da-do-do.”

Robb: I feel like I’m watching an episode of Homeland.

Jackson: There we go. Yes, that’s a good view.

Sandi: Well done.

Michael: Sorry about that, guys.

Sandi: [laughs]

Michael: I probably gave you a little bit of vertigo or something just there.

Jackson: It was good. I actually focused in right on yours, so on the video it’ll be all of that walking around.

[laughs]

Jackson: Hey, you gotta do what you gotta do, right.

Michael: Yeah, you know, startup. We do little things move here and there.

It’s kind of backwards what you’re doing. You’re actually leveraging technology to make things simple. Whereas most people avoid technology because they think it’s difficult. I really like that. So what demographic, what kind of person do you think would be attracted to the Wealthsimple model? Is there an age group? Is there any type of demographic that really targeting?

I know, of course, you’ll take anybody’s money, but who do you really want?

Michael: I mean, the answer is “everyone” of course.

Jackson: Yeah, of course.

Michael: Truly, I like to think of our community of investors, that we have a really wonderful community at Wealthsimple that we’re building. And it’s a community of people that believe that low costs, transparency, and diversified investment solutions make a whole lot of sense. And discipline, and sticking to a plan.

And the people that believe those things, we want to welcome into our community, and we hope everybody joins that community over time.

I think what you’re asking is who is going to be on this platform first.

Jackson: Who’s going to use it, yeah.

Michael: And I think our early adopters—which would come as no surprise—I expect to be the young professional who is in a wonderful, well-paying position, well-educated, building their assets. May not have an existing relationship, so is much more willing to try something new. Is more adept at using technology, so is more comfortable with that sort of thing. Grew up in the technology world. I think those will be our earliest of adopters.

But in the early data that we’ve seen in terms of interest in Wealthsimple, it really has been a broad group. So for instance, we hosted a wonderful feedback session here two weeks ago, where we have over 1,000 people on our waiting list right now.

We invited the first 100 to see what the response would be like, and over 40 people showed up after work on a Tuesday night, which was just remarkable to me to come and share their thoughts about what they hoped the service would look like. And that group was incredibly diverse. We had young folks in their early 30s, late 20s, in professional jobs, in startups, lawyers, dentists, doctors, and that whole thing. And then we had some folks early families, they’re just bought a house, they’ve got two kids, they’re starting to think about those phases of life. And then a bunch of folks that were either in or near retirement. It was a real broad section. It skewed younger for sure, but it really was a broad group of people that were out here and interested.

Robb: You know, Sandi wrote this really morbid article on my blog about what happens when you die. And so when someone in a relationship takes the control of the finances, and maybe they’re a DIY investor. And so they’ve got this maybe complicated strategy of dividend, stocks, or ETFs, or whatever. But their spouse or their other half isn’t going to be able to manage that. And so I can see where this would fill in the gap like that as well, where that can be managed or automated and take that stress out of your life.

Michael: Absolutely. Obviously that’s a really unfortunate circumstance that you wouldn’t hope on anybody, but certainly it’s a circumstance that happens and you have to talk about it. And I think that’s great that you wrote that article. I’m sure there are people that have had that happen to them and they have no idea where to turn for advice. So yes, certainly, a simple solution like this would be helpful.

Sandi: So I think that goes back then to one of the things I kind of teased with, and what we talk about when we say don’t use the word “robo-advisor”. Robb had sent us a link to a post on Huffington Post—I think it was Huffington, right Robb?

Robb: It was a Huff Po, yeah.

Sandi: Yeah, Huff Po about why robo-advisors are, you know, don’t trust your finances to just an algorithm. I’ve heard that from people that I really like, that are in the industry, that are saying the same thing. Like I don’t know, I would rather just have a real person. And I’m wondering, the term “robo‑advisor” almost aside—it’s a loaded question, obviously, because I know what I already think.

Michael: Lay it on me, Sandi.

Sandi: Why is robo-advisor the wrong thing? Why is that? It’s not algorithms, so what the real experience of somebody that signs up and is working with Wealthsimple?

Michael: Yeah, I think, the reason I hate that term, and I think I’ve been beating that drum pretty loudly. There’s an article that Jon Chevreau wrote a while ago that “Don’t call him a robo-advisor”, or whatever it was.

There’s a few things. When I think “robo”, it connotes a few images in my mind. One is mechanical, thoughtless, almost emotionless, and the reality is, with Wealthsimple in particular, that is not the business we’re building. There are real people, real world-renowned experts, and wonderful entrepreneurs behind the business that are building a fantastic solution for investors.

It is by no mean not robotic and thoughtless. It is incredibly well-supported by academic research and world-renowned experts. So one is like the human component on what’s behind the guts.

Two is we fundamentally believe that investing, while the process of investing and the discipline investing is really important, it is not emotionless. You know, you’re talking about peoples’ money. You’re talking about managing people through very important stages of their lives, and milestones. Like you said—even God forbid, to someone—the awful circumstance of losing a spouse or a loved one, how to manage that from a financial standpoint. This is not an emotionless thing. And you’ve got to have someone that’s there and able to help you navigate that.

So one of things that we’ve taken on as a core part of our value proposition from the early days is, “Every client gets a dedicated advisor.” And that is someone that is there. We’re calling it our “wealth concierge service”, and everybody gets a wealth concierge. And the idea is that this is your on-call person that should you ever have questions or needs, or someone to help guide you through whatever milestone in your life, this is the person that you can call and talk through. They have no sales commissions. They have no sales targets. They are simply there for advise and service. That is the full role that they serve on our team.

So “robo” and this wonderful human service that is backed by world‑renowned experts, it just seems that it doesn’t jive together. And that’s where my hesitation comes from. Because I want people to not feel that they’re trusting this to some that doesn’t understand what human condition. That is not at all what we do.

Jackson: So if we’re talking about the wealth concierge, so is every plan the same? Or is every plan catered specifically to an individual investor?

Michael: Yeah, so they are different pieces to a plan, right? So in our early days, we are focused on the investment side of the plan, and we do use models to help us form those plans, but we have a lot of models. You know, we have forty different portfolios that we’ve constructed. And a big part of your wealth concierge’s role—especially when onboarding a new client or investor to our community—is trying to understand which portfolio is right for you.

So from a suitability, a goals perspective, what makes the most sense for you that can vary by different accounts. So if you one TFSA that you want to treat very differently than a taxable account, we can do that. So the point is we’re trying to understand your goals and needs, and find the right fit for you.

Because when you think about it, if you think about that there are—depending on who you ask—call it 6 to 15 asset classes that are worth investing in. And if asset allocation delivers 90+ percent of your long-term returns, then there are model portfolios by definition. Because there’s not all that much you know infinite changes that you can be making in that mix of things.

So use 10 asset classes and we have quite a number of portfolios that we’re able to construct for that based on risk tolerance, tax profile, goals, and we think that that’s a pretty robust solution.

Robb: And is there a cost difference between any other 40 portfolios? I don’t have to worry about my concierge putting me in the one that pays the highest commissions, right?

Michael: Yeah, so making it clear again, there are zero commissions. The only thing that we make money off is our management fee. We charge a half percent, and it goes down from there as you build assets. So a half percent, it goes down to 35 basis points over time. That’s remarkably low for an investment manager in this country, when you think about most charging 1 or 1-1/2 percent plus. The variance in fees between the portfolios is simply by the allocation to the ETFs in those portfolios. So there is some slight variance, just given the allocation a certain higher-fee ETFs.

But we do two things: one is we only use low-cost ETFs; second is we’ve managed to negotiate preferred pricing on those ETFs, so even if you were to try to implement this as a retail investor, you’d never be able to match the price point on these portfolios that we’ve been able to offer people because of these preferred pricing relationships we’ve built.

Robb: But to be clear, there are no triple leverage bull bear Bolivian ETFs?

Michael: No, no, no, no. [laughs] No, to be clear, so the way we see this portfolio, we’re not swinging for the fences here. This is meant to be the core of your wealth; what you’re looking to put away for the long-term, to build your nest egg over time. And we think about that as a broad based portfolio that is thoughtful about risk.

So the asset classes that we include are your core equities. When you think about Canada-US foreign developed markets and emerging markets. We also include risk managed strategies in there too, so things that if 2008 came along again—which by the way, it will at some point in the future. Who knows when but we’re going to see another market correction—we offer some insulation on the downside. So a strategy that moves from equities to cash, so there’s some balance in there that people freak won’t freak out and sell their entire holdings and jump out of the market. Institutional type strategies that people have been using for decades. Well, institutions have been using for decades, and retail investors have never had access to in a meaningful way.

And fixed-income—bonds are a really crazy type of asset class these days that most people when they think of bonds, think wow this is a really low risk that’s that that makes a lot of sense in a retirement portfolio. But given where interest rates are, that’s just not the reality today. And when you think about bonds or the purpose of bonds in the portfolio being one, diversification, and two, income generation. You’ve got to think more broadly about where to get income these day because bonds just are not that low-risk asset class as you could have thought about them over the last 30 years.

So we look at things like real estate, dividend-paying stocks as other ways to diversify the income streams.

Robb: So this model has been around in the US for a few years, and so what have you kind of gleaned from that? How that’s gone and what you plan on bringing to Canada?

Michael: Yeah, you know, I think if anything, just a lot of excitement. There has been a tremendous amount of traction for the US players, and I think that just shows that this whole conversation we had at the beginning around is the industry change being or is ready for change. I think it’s a wonderful proof point that we are ready for a change. We’re eager for change and I hope that that happens in Canada very quickly too.

So one is excitement for where the industry is moving and a wonderful proof point point that we’re seeing in the State’s. And two is if anything we’ve managed to learn a little bit from what they’ve done. So the US guys, a lot of people don’t know, have been through a lot of iterations of product cycles. They didn’t start off as these wonderful low-fee, broadly diversified investment management services that everybody has come to know them as “robo-advisors.” That’s kind of been a few years in the making of product iterations to get where they are today, so we’ve been able to learn from what they’ve done really well and what they haven’t done so well, so that we’ve been able to take the best of that feedback to build what Wealthsimple is right now.

Robb: And do you expect to earn vests in some of big players in the US to move up north. I just see what’s going on—maybe it’s a weird example—but say the streaming music industry right now where you know Google launched one and now Spotify’s coming to Canada, and there just seems to be all these types of services now coming into Canada. Do you see that opening up now with this type model?

Michael: Yeah, I get that question a lot.

Robb: About the streaming music?

Michael: About the streaming music, specifically.

Robb: You like Spotify or Google that?

Michael: I’m a Spotify, yeah, if I had to choose. Although I had a friend at Rdio so I was loyal Rdio for that purpose. I don’t know that Rdio ever made it up here. I think that was while I was in Silicon Valley.

Robb: Yeah, they did.

Michael: So the answer is “no,” I don’t think they’re coming anytime soon, for a few reasons. One is unlike music, investments and portfolios are incredibly different by geography. So it’s not like Wealthfront or Betterment could simply take the portfolio that they’ve constructed, move it to Canada and it would work for Canadians. That’s not true. There and very Canadian-specific questions that have to be answered in the portfolio from a what does it make sense from a currency perspective to a tax perspective, to a home bias perspective. Canadians like to invest in Canada. It’s not the same portfolio. So there would be a major product change that would have to happen to make them come here. And two is, unlike music again, which is for a regulated environment, it’s nowhere near as regulated is the investment industry is. So there’s a massive hurdle.

Robb: Well, you must have it tough then, because I think it is pretty regulated. [laughs].

Michael: Yeah. [laughs] Yeah. Not quite as heavily-regulated as this industry is. So I don’t expect them to come up soon, if at all. Plus the reality is even Wealthfront, that’s doing exceptionally well—I think they have over a billion and a half in assets now, which is just remarkable early traction in the US. Frankly, in the scope of the size of the investment world, it’s peanuts. And they’ve got, from a business perspective, their job cut out for them in the States for the foreseeable future. That’s what I’d say about that.

Sandi: I really want to keep going, but I am noticing that it’s 10:11, [laughs] and I think we might have taken a lot of your time already. Is there anything you feel like we just didn’t—is there something that you just wanted to make sure to get out?

Michael: Yeah, I’d say my parting thought is really where we are coming from, is we’re trying to solve a big problem for investors. WE want to build a product that people love. We’re not trying to build a product in a black box and shove it down Canadians’ throats.

So we are eager for ideas, for feedback, for suggestions. If people don’t like something that we’ve done, we want to hear about it. If people loved something that we’ve done, we want to hear about it. If people have ideas we haven’t even thought of, we want to hear about it. So really, if that excites you about having a hand in trying to shape a wonderful team that is excited about taking on this challenge. We’re looking for partners in our communities, so please feel free to check out the site, sign up. Whether or not you decide you want to become a client, which of course we would love to have you join our community. Your feedback and ideas would be incredibly appreciated.

So that would be my parting thought, is we have a big ambition for what investing in Canada could be. We think it’s going to take a lot of minds and energy to get that right, and we’re eager for help and ideas to get there.

Sandi: Well that’s fantastic. I really appreciate you coming on. I think that’s great. And congratulations with the rollout. I am excited to watch, to see what happens. I hope that you break the investment management world. I’m really excited about that.

Michael: Well thank you so much for having me, guys. We’ve chatted a few times now in a couple of different settings, and it’s always been really fun to connect with you guys. I love the show and I love that you guys just keep the conversation going about what should be top-of-mind for investors in Canada. It’s awesome.

Jackson: Well thanks. Thanks for coming on the show. Michael you killed it. Okay, good-bye.

Hi Diane – you’d have to confirm that with the Wealthsimple team. Mike told us that there are no trailing commissions embedded in their management fees, so the advisors are likely paid a salary unrelated to the types of investments you purchase through them or the type of advice they give you.